The influence of French banks on the development of European financial markets

Introduction

Europe remains a predominantly bank-based financial system, and whether its largest banks support or crowd out capital markets has become a central question of European financial policy: the Capital Markets Union (CMU) action plan of the European Commission aims to deepen and integrate the capital markets of the European Union (EU), so that firms rely less on bank credit [13]. At the same time, the three largest French banking groups, BNP Paribas, Société Générale and Crédit Agricole, are leading underwriters, market-makers, asset managers and participants in market infrastructure, and all three groups, or in Crédit Agricole's case its central body, appear on the list of global systemically important banks of the Financial Stability Board [14]. The relevance of the topic lies in the fact that the answer determines the design of the CMU and the supervision of concentration and systemic risk.

Any judgement about the influence of banks on financial markets presupposes a theory of what banks and markets do, separately and together. The starting point of the theoretical discussion is the observation, formalised in the comparative literature of the late twentieth century [1; 20], that economies organise the allocation of capital in two stylised ways. In a bank-based system, exemplified historically by Germany, Japan and France, financial intermediaries collect deposits, screen borrowers, monitor them over long horizons and smooth shocks across time. In a market-based system, of which the United States and the United Kingdom are the canonical cases, prices formed on securities markets aggregate dispersed information, discipline managers through the threat of takeover and allow risk to be shared across a wide investor base at a single point in time.

The French system of the post-war decades was not merely bank-based but state-bank-based: until the liberalisation of the mid-1980s, credit allocation was administratively steered through the encadrement du crédit, and the largest banks were nationalised. The reforms of 1984–1988, which created a unified banking law, opened the Paris financial futures market and launched privatisation, deliberately constructed a securities market on top of a banking oligopoly. The consequence, visible to this day, is that French capital markets did not grow against the banks but through them.

A second theoretical building block concerns the transformation of bank business models themselves. Hardie and Howarth captured this shift with the concept of market-based banking [11]: contemporary large banks fund themselves substantially in wholesale markets, hold trading portfolios marked to market, and earn a growing share of income from fees rather than from the interest margin. For such institutions, the depth of capital markets is not an external environment but an input into their own production function. The theoretical expectation that follows, and that the empirical analysis will test indirectly, is that the growth of large universal banks and the growth of market capitalisation should be complements rather than substitutes.

The recent literature extends this discussion in several directions. Bats and Houben find that bank lending raises systemic risk in relatively bank-based systems, while market financing lowers it [3]; Xu shows that results on the link between financial structure and growth are inconsistent [33]. Vikelidou and Tagkalakis explain why the Banking Union remained incomplete a decade after its launch [31];

Lamandini and Thomadakis argue that removing obstacles to cross-border bank consolidation would support the Banking Union and the CMU [18]; Bavoso criticises the CMU for promoting market-based funding, in particular securitisation and repo, without adequate regulation [4]. A further strand examines the profitability and resilience of European banks. Marques and Alves find that reliance on deposits and equity improves profitability and distance to distress, while larger size tends to hurt [23]; Markoulis, Ioannou and Martzoukos examine the roles of capital, size and revenue diversification in EU bank distress [22]. Negative interest rates reduced the net interest margin of a typical European bank by about 14.5 basis points, with effects differing by business model [21]; euro area banks offset the squeeze mainly by shifting towards non-interest income and cutting costs [15]; and the Net Stable Funding Ratio (NSFR) combined with ultra-expansionary monetary policy depressed net interest margins in 2013-2018 [7].

Another strand concerns systemic risk, financial centers and liquidity. Armanious compares systemic risk measures across Eurozone financial sectors [2]; Broto, Fernández Lafuerza and Melnychuk show that buffer requirements lower the perceived systemic risk of European systemically important banks [8]; Meyland and Schäfer find that home bias in sovereign exposures often lowers the probability of bank failure [24]; Xiao, Zhu and Wu show that the effect of securitisation on systemic risk is non-monotonic [32]. Panitz and Glückler find that relocations from London after Brexit were limited and selective [25], and Papavassiliou and Xia document a marked deterioration of euro area sovereign bond liquidity in March 2020 [26].

The aim of the study is to determine the nature and mechanisms of the influence of BNP Paribas, Société Générale and Crédit Agricole on the development of European financial markets. The scientific novelty lies in combining a functional classification of five channels of influence with a comparison of the profitability and capital adequacy of the three groups over 2015-2025 and with a test of the statistical relationship between their combined assets and the STOXX Europe 600 index, in levels and in annual changes. The authors' hypothesis is that the development of the largest French banks and of European capital markets is complementary rather than substitutive.

The methodology follows an explanatory, case-based design in two linked stages: the first maps the institutional channels through which a universal bank can affect the depth of capital markets, with the risks attached to each; the second tests whether this influence shows up in quantitative indicators. The data are secondary, quantitative and annual: consolidated annual reports and universal registration documents of BNP Paribas [6], Crédit Agricole S.A. [9], and Société Générale [28] for 2015-2025 and the year-end level of the STOXX Europe 600 index [29].

Theoretical analysis of the channels of influence of French banks on European financial markets

Identifying mechanisms of influence requires moving from system-level theory to the functional anatomy of a universal bank. The first and most visible channel is the primary market channel: banks originate, underwrite and place securities, thereby converting financing needs into tradable instruments. In the euro-denominated bond market, BNP Paribas and Crédit Agricole Corporate And Investment Bank (CIB) have for years occupied top positions in the league tables for corporate, financial and sovereign issuance, and French banks were among the structuring pioneers of the green bond segment after Crédit Agricole CIB co-authored the Green Bond Principles in 2014. An issuer in Lisbon or Vilnius can access pan-European savings only because an underwriting syndicate with distribution capacity exists, and in Europe that capacity is concentrated in a handful of balance sheets, several of them French.

The second channel is liquidity provision in secondary markets. Market-making in equities, government bonds and derivatives demands inventory capacity, technological scale and the willingness to warehouse risk. Société Générale's historical specialisation in equity derivatives, dating back to the late 1980s, made it for long stretches the world's leading house in structured equity products, while BNP Paribas consolidated this segment further by absorbing parts of Deutsche Bank's equities and prime-brokerage franchise in 2019–2021 and by acquiring Exane in 2021. The consequence deserves emphasis: when non-European dealers retrench, as they did during the stress episodes of 2008 and 2012, the continuity of trading in many European instruments depends on whether French dealers maintain their quotes.

The third channel runs through asset management and insurance, the buy side that French groups own on a scale unmatched elsewhere in continental Europe. Amundi, the asset-management subsidiary of Crédit Agricole created in 2010 and floated in 2015, has grown into the largest European asset manager with more than two trillion euros under management [9]; BNP Paribas agreed in 2024 to acquire AXA Investment Managers (AXA IM), creating a second French manager of comparable continental weight. Asset managers transform household savings into demand for equities and bonds, and their domicile shapes which markets receive that demand first. Through this channel French banks influence not the supply of securities but the depth of the investor base, which the Capital Markets Union literature consistently identifies as Europe's weakest point [13].

The fourth channel is the securitisation and risk-transfer channel, through which banks convert illiquid loans into market instruments and free regulatory capital for new lending. After the post-crisis stigma, the European securitisation market revived slowly, and French banks became among its most active issuers of significant risk transfer transactions in 2023–2025. The mechanism matters because it links bank balance-sheet management directly to the menu of instruments available to institutional investors: every synthetic risk transfer by Crédit Agricole CIB simultaneously strengthens the bank's Common Equity Tier 1 (CET1) ratio and creates a new credit-linked asset class for funds.

The fifth channel is infrastructural and regulatory. Large French banks sit on the governance bodies of Euronext, of clearing houses and of industry associations, and they constitute, alongside the French state, one of the most effective lobbying coalitions in European financial rule-making. Their preferences have demonstrably shaped the Banking Union, the calibration of the Basel output floor in the EU, and the post-Brexit relocation of euro clearing and trading staff towards Paris. The relocation effect is clearly visible: after 2016 Paris became one of the main post-Brexit destinations for markets businesses, with major American banks expanding their French trading floors precisely because the local ecosystem of dealers, clients and regulators had critical mass. French banks did not create Brexit, but their presence converted a regulatory shock into a structural gain for the continental market centred on Paris.

Each channel carries a corresponding risk, and an honest theoretical framework must state them. Concentrated underwriting creates gatekeeping power over which issuers reach the market. Concentrated market-making converts the funding stress of one dealer into a liquidity drought for thousands of instruments, which is the textbook definition of systemic importance and the reason all three groups, or in Crédit Agricole's case its central body, appear on the Financial Stability Board's list of global systemically important banks [14]. A dominant domestic buy side can introduce home bias into allocation. The net effect of French banking influence is therefore an empirical question, not a definitional one, and this motivates the empirical analysis that follows.

The functional camp replies that the dichotomy underlying the bank-bias argument misclassifies universal banks. Véron and Schoenmaker [30], among others, have emphasised that Europe's problem is not the existence of large banks but the incompleteness of its financial integration: without a single supervisor, a common deposit insurance and harmonised insolvency rules, markets cannot scale, and large cross-border banks are one of the few existing mechanisms of integration. In this reading, BNP Paribas operating in Belgium, Italy, Luxembourg and Poland performs privately what the Banking Union has only partly achieved publicly, namely the pooling of European savings and risks across borders. The European Central Bank's own financial-integration reports lean towards this view when they note that cross-border banking groups smooth local credit shocks better than fragmented national systems [11].

A third, more recent strand of literature focuses on strategic autonomy and asks who will build European capital markets if European banks do not. Market data document the growing share of American investment banks in European wholesale finance: according to Dealogic, US banks accounted for 41 percent of European core investment banking revenue in early 2016, up from 36 percent a year earlier and the highest level since 2000, and for 61 percent of mergers and acquisitions (M&A) advisory revenue [7]. Against this backdrop, French banks appear less as an obstacle to the Capital Markets Union than as its only plausible European executor, an argument that French officials have used explicitly when defending the consolidation ambitions of their national champions. The argument has obvious self-serving elements, and a critical reader should treat ministerial enthusiasm as evidence of political economy rather than of welfare effects; nevertheless, the underlying observation about the growing American presence in European investment banking is factually accurate and analytically uncomfortable for the sceptical camp.

The theoretical analysis thus identifies competing explanations of banks’ influence on market development. If the sceptics are right, the growth of French banks should coincide with stagnant or shallow markets; if the functional view is right, bank growth and market growth should move together, with French banks supplying the infrastructure of market deepening. These competing expectations are testable, at least in their correlational form, and the following empirical section examines them using eleven years of data.

Empirical analysis of the influence of French banks on European financial markets, 2015–2025

The empirical base consists of the consolidated annual reports and universal registration documents of the three groups for the financial years 2015 through 2025 [6; 9; 28]. For Crédit Agricole, the analysis uses the listed entity Crédit Agricole S.A. for profitability indicators, since this is the perimeter priced by the market, while noting where the figures for the wider mutual group, whose Common Equity Tier 1 ratio of around seventeen percent [9] is among the highest of any large bank in the world, diverge materially. All figures are rounded; minor discrepancies with primary sources may arise from restatements and changes in accounting perimeter, of which the period contained several, most notably the disposal of Rosbank by Société Générale in 2022 and the deconsolidation of Bank of the West by BNP Paribas in 2023.

Three indicators organise the comparison. Return on equity, calculated here as net income attributable to shareholders divided by end-year group shareholders' equity, measures how productively the banks employ their owners' capital; it is the indicator investors track most closely and the one on which European banks have chronically trailed American peers. Return on assets, the ratio of net income to total assets, strips out the effect of leverage and reveals the thin underlying margins of the universal banking model. The Common Equity Tier 1 ratio, the share of risk-weighted assets covered by the highest-quality capital, captures regulatory resilience and simultaneously constrains the balance-sheet capacity that the banks can devote to market-making and underwriting, which links it directly to the influence channels described in the theoretical section.

For the correlation analysis, the combined total assets of the three groups measure French banking scale, while the year-end level of the STOXX Europe 600 index represents European equity market performance [29]. The index is used as an indicator of equity price dynamics rather than a direct measure of aggregate market capitalisation or the development of European financial markets as a whole. Pearson correlation coefficients are calculated for both annual levels and first differences to assess whether the relationship persists when annual changes are examined.

Table 1 presents the return on equity of the three banks. The series tell three different stories beneath a superficially similar trajectory. BNP Paribas exhibits the steadiest profile of the three: its return on equity never left the corridor between six and ten percent, dipped only moderately in the pandemic year, and then climbed almost monotonically to above nine percent by 2024–2025. Stability of this kind is not an accident of fortune but a consequence of diversification; in every stress episode of the period, weakness in one division, retail margins in 2020 or fixed-income trading in 2018, was offset by strength in another, and the 2019–2021 absorption of Deutsche Bank's prime brokerage converted a competitor's retreat into a durable revenue stream.

Table 1

Return on equity (ROE) of the largest French banking groups, %

Société Générale demonstrates the opposite pattern: the highest volatility in the sample and the lowest average. Its return on equity turned negative in 2020 as losses on structured equity products compounded pandemic-related provisions, before recovering sharply in 2021. It fell below four percent again in 2022–2023, partly reflecting the accounting loss of more than three billion euros recognised by Société Générale following the disposal of Rosbank, alongside pressure on French retail banking margins from regulated savings rates and slow asset repricing. The recovery to six percent in 2024 and more than eight percent in 2025 followed a deliberate strategic shrinkage: a programme of disposals, including the subsidiaries in Morocco, Chad, Congo and Madagascar finalised in 2024 [27], an increased payout ratio and a concentration on the markets businesses where the bank retains genuine comparative advantage. The implication for the research question is direct: the bank whose business model depends most heavily on capital-market activities proved the most fragile shareholder proposition, which cautions against romanticising the market-making function.

Crédit Agricole S.A. occupies the most interesting position. Starting from mid-range profitability, it overtook BNP Paribas on return on equity in 2023–2024, reaching 9.5 percent in 2024, while running the lowest standalone CET1 ratio of the three, a combination made possible by the support of the mutual group standing behind the listed vehicle. Its profitability rests disproportionately on fee-generating, capital-light businesses, asset management through Amundi, insurance through Crédit Agricole Assurances and asset servicing through CACEIS, which is precisely the configuration that the theoretical analysis identified as the buy-side channel of market influence. The bank's results thus illustrate a structural conclusion: in the post-2015 European environment, building markets paid better than intermediating credit.

Table 2 reports return on assets, and its compression of all three series below half of one percent is itself a finding. Even the best French performance never reached 0.45 percent, roughly half of what large American banks earned in the same years. Two causes interact. European universal banks carry enormous low-margin balance sheets, including derivatives books and repo positions that inflate assets under international Financial Reporting Standards (IFRS) relative to US Generally Accepted Accounting Principles (GAAP) netting rules, and the negative-rate environment of 2015–2021 taxed the deposit franchise that historically anchored European bank earnings. The reversal after 2022, when the European Central Bank lifted rates out of negative territory, is clearly visible in the upturn of all three series, which confirms how dependent even fee-rich French banks remain on the interest-rate cycle.

Table 2

Return on assets (ROA) of the largest French banking groups, %

Table 3 turns to capital adequacy. BNP Paribas and Société Générale raised their CET1 ratios by roughly two to three percentage points over the decade, from around eleven percent in 2015 to between twelve and fourteen percent in 2024–2025; Crédit Agricole S.A.'s standalone ratio rose more modestly over the same period, from 10.7 percent in 2015 to just under twelve percent in 2024–2025, while the wider mutual Crédit Agricole Group reached approximately seventeen percent. The increase was regulatory in origin, driven by the phasing-in of Basel III and the European Central Bank's supervisory expectations, but its market consequences were profound and double-edged. Higher capital made the system demonstrably safer: none of the three banks required state support at any point in the period, in marked contrast to 2008–2012, and all maintained comfortable capital buffers under the adverse scenarios of the European Banking Authority's stress tests. [10] Yet the same requirements raised the cost of warehousing trading inventory, encouraged the migration of risk towards synthetic transfers and funds, and partially explain why French banks now sponsor securitisation markets so energetically: risk transfer is the arbitrage that reconciles regulatory capital scarcity with commercial ambition.

Table 3

Common Equity Tier 1 (CET1) ratio, fully loaded, year-end, %

Table 4 assembles the data for the correlation analysis: the combined total assets of the three groups, which grew from approximately 4.9 trillion euros in 2015 to about 6.7 trillion in 2025, and the year-end level of the STOXX Europe 600, which rose from 366 to about 592 points over the same period. The Pearson coefficient computed on the eleven annual levels equals 0.87, with a t-statistic of about 5.3 against nine degrees of freedom, significant at the one-percent level. This coefficient indicates a strong positive association between the levels of the two series, but does not establish that banking expansion drives equity market growth.

Table 4

Combined assets of French banking groups and the European equity market

When the analysis is repeated using annual changes, the correlation falls to approximately −0.04 and is statistically insignificant. This contrast suggests that the strong association in levels may reflect common trends rather than a stable relationship between annual movements. Shared macroeconomic influences, including monetary policy, are possible explanations, although their individual contributions are not estimated in this study.

These results neither conclusively confirm nor reject the hypothesis that bank dominance crowds out capital-market development. They also provide no evidence of a direct causal relationship between banking scale and equity market performance. Changes in bank assets may reflect acquisitions, disposals and derivative revaluations that do not necessarily follow the equity market cycle. The assessment therefore turns to institutional evidence on the channels through which French banks influence European markets.

The structural evidence is considerably less ambiguous than the annual statistics. Consider first the investor-base channel. Amundi managed approximately 950 billion euros at its stock-market debut in late 2015 and more than 2.3 trillion by 2025 [9], an expansion achieved partly through the acquisitions of Pioneer Investments in 2017 and Lyxor in 2021; the BNP Paribas purchase of AXA Investment Managers, completed in 2025, created a second manager with around 1.5 trillion euros under management [5]. This concentration is a market-development fact of the first order: every structural inflow these managers direct into European exchange-traded funds, green bonds or small-cap equities deepens the corresponding market segment.

Consider next the liquidity channel during the stress episodes of the period. In March 2020, when European corporate bond markets seized, the primary market reopened within weeks through jumbo issues led predominantly by the euro-zone dealer banks, with BNP Paribas among the leading bookrunners of euro-denominated corporate bonds that year; firms from across the continent refinanced through syndicates in which French banks were structurally indispensable. These episodes demonstrate influence of a kind invisible to correlation analysis: the counterfactual without French balance sheets would have been deeper market closure, and counterfactuals leave no trace in time series.

The consolidation wave of 2024–2025 supplies a third body of evidence. BNP Paribas's acquisition of AXA IM, Crédit Agricole's expanding stakes in Banco BPM and in asset-servicing ventures, and Société Générale's private-markets partnership with Brookfield all share one direction: French banks are buying the fee-generating, market-facing layers of European finance while shedding peripheral retail operations.

Discussion

The two stages of the analysis lead to a qualified reading of the hypothesis: the strong correlation in levels disappears in annual changes, so the quantitative evidence is compatible with complementarity but does not demonstrate it. The findings do not reproduce the pattern predicted by the sceptical camp: Langfield and Pagano [19] and Bats and Houben [3] associate a large banking sector with slower growth and higher systemic risk, whereas over 2015-2025 the assets of the French groups and the European equity index rose together in levels. They are closer to the functional view of Véron and Schoenmaker [30] and of Lamandini and Thomadakis

[18]. The profitability results agree with studies of European banks under low interest rates: the low return on assets of all three groups and its recovery after 2022 match the evidence that negative rates reduced net interest margins [15; 21], and the results of Crédit Agricole S.A. with a fee-based model agree with the finding that business-model choices matter for profitability [23].

Interpretation also requires acknowledging the costs and concentration risks that accompany this influence. The combined assets of the three groups exceed twice French gross domestic product, a ratio that makes the French sovereign and the French banking system mutually dependent to a degree the euro-area architecture was designed to dilute; the European Central Bank's financial stability reviews have repeatedly flagged the sovereign-bank nexus and the systemic footprint of the largest universal banks [12]. Scale of this kind concentrates operational and legal risk along with liquidity capacity.

Conclusion

This study examined the extent and nature of French banks’ influence on European financial markets through theoretical analysis and an empirical comparison of BNP Paribas, Société Générale and Crédit Agricole over 2015–2025. It identified the principal mechanisms of influence, assessed the financial performance of the three groups and tested the statistical relationship between their combined assets and the STOXX Europe 600 index.

The theoretical analysis highlighted the overlapping roles of banks and capital markets in contemporary European finance. The largest French banking groups combine lending with underwriting, market-making, asset management and infrastructure services. Their influence extends through securities issuance, secondary-market liquidity, institutional investment, securitisation and participation in financial governance. These activities provide mechanisms through which universal banks can contribute to market development, while also concentrating financial intermediation.

The empirical comparison revealed distinct performance patterns. BNP Paribas demonstrated the most stable profitability (return on equity of 6.3-9.7 percent), Crédit Agricole S.A. benefited from its asset management and insurance businesses (up to 9.5 percent in 2024), and Société Générale exhibited the greatest volatility (from -0.4 to 8.7 percent). Capital ratios increased over the period, although the magnitude of improvement varied across the groups. These findings indicate differences in business models and resilience rather than a uniform trajectory of French banking development.

The correlation analysis found a strong relationship between combined banking assets and the STOXX Europe 600 index in levels, with a coefficient of approximately 0.87. However, the relationship became statistically insignificant when annual changes were examined. The results therefore do not establish a direct causal link between banking expansion and European equity market performance, nor do they conclusively confirm or reject the hypothesis that bank dominance crowds out capital-market development. Institutional evidence provides a more informative basis for assessing influence: the expansion of asset management businesses, liquidity provision during periods of stress and acquisitions of market-related activities demonstrate how French banks participate in the functioning of European capital markets.

The main problems are the concentration of underwriting, market-making and the investor base in a few balance sheets, the mutual dependence of the French sovereign and banking system, and the sensitivity of profitability to the interest-rate cycle. The authors therefore recommend that (a) supervisors monitor the concentration of underwriting and market-making in systemically important banks together with their balance-sheet size; (b) the Banking Union be completed and obstacles to cross-border bank consolidation removed [18; 31]; (c) CMU measures broaden the non-bank investor base; and (d) securitisation and risk transfer be regulated in proportion to the leverage they can create [4; 32].

Overall, the findings suggest that French banks make a substantial contribution to European financial market development through their intermediary services, investment flows and infrastructure activities. This contribution is accompanied by concentration risks and systemic interdependencies, making effective supervision and credible resolution arrangements important conditions for financial stability. Future research could use quarterly data, additional measures of market development and cointegration methods to investigate long-run relationships, while comparisons with other European banking systems could help distinguish the specific features of the French model.